Dani Evanson, Managing Director at RMA: “There are still a lot of great opportunities in primary US markets, both in core-plus and value-add. The key is to have access to unique deal flow through strong operating partner relationships.”
Most investors who have real estate investments in US funds or direct deals are no doubt aware that we are in a very low cap rate environment, driving up asset values in both primary and secondary markets across most property types. We sat down with Dani Evanson, Managing Director of Regis Metro Associates, Inc. (“RMA”), to discuss the market trends she and her team are seeing and how that impacts their investment strategies.
RMA is a registered investment advisor and private real estate investment firm with over $1 billion of capital under management[1]. RMA specializes in creating, sourcing and managing customized real estate investment portfolios for wealth management firms, family offices and foundations. RMA currently operates and manages or co-manages a number of closed-end private real estate investment funds.
Dani Evanson has over 18 years of real estate experience with a background in acquisitions, dispositions, and portfolio management. Prior to joining RMA, Dani was a Real Estate Director at a Los Angeles based family office. Dani was primarily responsible for investing and managing a real estate portfolio valued at over $2 billion consisting of investments in commercial properties, investment funds, joint ventures and real estate operating companies.
You invest across a mix of primary and secondary markets. What cities or regions are you most interested in right now?
Our general focus is on the greater costal gateway markets (Southern California, the Bay Area, Seattle, Washington D.C., New York and Boston). We target these markets based on past performance, a history of stability and low volatility, and projected long-term growth. While these markets are said to be “overpriced”, we focus on middle market opportunities which aren’t being chased by the large institutions out bidding one another. We favor strong locations with mispriced opportunities or properties that will benefit from physical or operational improvements.
What kind of interesting opportunities are you finding in your target markets?
We are working on a deal in Washington DC with our operating partner to acquire a vacant industrial building 3 miles from Washington’s city center. Our operating partner sourced it through their relationships in the submarket. The building is small, approximately 130,000 square feet, which made it too small for institutional investors to pay attention to the deal. We have a deep value add business plan and will execute a strategy to fix a few structural defects, lease the property and sell it within 2 to 3 years.
Are you seeing the weakness in the energy sector offering opportunities in Texas and regions in the Southeast with high exposure to the dramatic decline in oil & gas prices?
One of the reasons RMA has typically stayed away from investing in Houston is precisely because of its energy industry concentration and associated real estate pricing volatility. Investing in real estate in Houston today is almost a proxy for investing in oil, which frankly is not our framework for investing.
You run a very balanced property type strategy. Will you be shifting the mix this year to take advantage of opportunities in retail as more shopping continues to move online?
We practice diversification first and foremost. We may favor a certain property type more than another in any given cycle, but we look at all the property types in each of our target markets. As an example, we have made a number of retail investments over the last few years which are providing for cash on cash returns in excess of 10%. These retail properties have heavy foot traffic, fast food and other retailers that you physically have to visit; because buying a fresh latte on the internet is not yet available. We understand the retail landscape is changing with Amazon Prime and Google Express. This retail trend also impacts the industrial sector, as distribution centers are moving closer to urban infill locations to keep up with the rising demands for same day delivery. As a result, we are targeting very well located warehouses near city centers similar to the example I mentioned previously.
How did your vintage funds look in the prior cycle? Have you been able to consistently deliver current yield even in declining pricing environments?
Our track record reflects our thesis of diversification. Our approach has served us and our investors well through the downturn and the recovery. We are able to continue to provide risk adjusted returns in this environment by focusing on our strengths and not allowing mission drift to take us to markets like Houston, Las Vegas and Phoenix.
When do you think the asset inflationary cycle slows down? Do you anticipate a softening coming in 2017?
This real estate cycle will slow down when interest rates rise, as cap rates are heavily correlated to treasuries. We won’t see real estate prices fall significantly if the economy continues to improve and grow. All bets are off if treasuries rise and the economy stalls or falls.
How does your team stay current on properties both for acquisition and management? How do you stay top of mind across your many operating relationships?
RMA's management team is comprised of seasoned real estate professionals with extensive experience in real estate investment, development, law, capital markets, portfolio management and fund operations and management.
We have strong, long term, relationships with our local operating partners with the ability to provide on-going capital. We are a rational real estate equity source for our partners, who appreciate what we bring to the table.
Thanks a lot to Dani Evanson for her time with us.
No information made available on the following document is or purports to be investment, tax or other advice or is intended to provide the basis of any credit or other evaluation. Nor should any such information be considered a recommendation by Trusted Insight (TI) or North Capital Private Securities (NCPS), or any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) to purchase or sell any securities. Before entering into any particular transaction, you are advised to obtain such independent financial, legal, accounting and other advice as may be appropriate under the circumstances. In any event, any decision to enter into a transaction will be yours alone, not based on information prepared or provided by this document. TI, NCPS and Regis Metro Associates, Inc. (RMA) hereby disclaim any responsibility to you concerning the characterization or identification of terms, conditions, and legal or accounting or other issues or risks that may arise in connection with any particular transaction or business strategy. Neither TI, NCPS and RMA nor any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) accepts any responsibility for or shall have any liability in respect of any use of any information or materials made available on the following document. Nothing shall under any circumstances create any implication that any information made available on the following document is correct or accurate. Neither TI, NCPS nor any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) makes any representation or warranty with respect to any information made available on the following document.
[1] Capital under management represents the aggregate capital of RMA’s clients and investment vehicles committed to real estate investments as of 12/31/14. RMA has approximately $775 million in regulatory assets under management as of 12/31/14.
Most investors who have real estate investments in US funds or direct deals are no doubt aware that we are in a very low cap rate environment, driving up asset values in both primary and secondary markets across most property types. We sat down with Dani Evanson, Managing Director of Regis Metro Associates, Inc. (“RMA”), to discuss the market trends she and her team are seeing and how that impacts their investment strategies.
RMA is a registered investment advisor and private real estate investment firm with over $1 billion of capital under management[1]. RMA specializes in creating, sourcing and managing customized real estate investment portfolios for wealth management firms, family offices and foundations. RMA currently operates and manages or co-manages a number of closed-end private real estate investment funds.
Dani Evanson has over 18 years of real estate experience with a background in acquisitions, dispositions, and portfolio management. Prior to joining RMA, Dani was a Real Estate Director at a Los Angeles based family office. Dani was primarily responsible for investing and managing a real estate portfolio valued at over $2 billion consisting of investments in commercial properties, investment funds, joint ventures and real estate operating companies.
You invest across a mix of primary and secondary markets. What cities or regions are you most interested in right now?
Our general focus is on the greater costal gateway markets (Southern California, the Bay Area, Seattle, Washington D.C., New York and Boston). We target these markets based on past performance, a history of stability and low volatility, and projected long-term growth. While these markets are said to be “overpriced”, we focus on middle market opportunities which aren’t being chased by the large institutions out bidding one another. We favor strong locations with mispriced opportunities or properties that will benefit from physical or operational improvements.
What kind of interesting opportunities are you finding in your target markets?
We are working on a deal in Washington DC with our operating partner to acquire a vacant industrial building 3 miles from Washington’s city center. Our operating partner sourced it through their relationships in the submarket. The building is small, approximately 130,000 square feet, which made it too small for institutional investors to pay attention to the deal. We have a deep value add business plan and will execute a strategy to fix a few structural defects, lease the property and sell it within 2 to 3 years.
Are you seeing the weakness in the energy sector offering opportunities in Texas and regions in the Southeast with high exposure to the dramatic decline in oil & gas prices?
One of the reasons RMA has typically stayed away from investing in Houston is precisely because of its energy industry concentration and associated real estate pricing volatility. Investing in real estate in Houston today is almost a proxy for investing in oil, which frankly is not our framework for investing.
You run a very balanced property type strategy. Will you be shifting the mix this year to take advantage of opportunities in retail as more shopping continues to move online?
We practice diversification first and foremost. We may favor a certain property type more than another in any given cycle, but we look at all the property types in each of our target markets. As an example, we have made a number of retail investments over the last few years which are providing for cash on cash returns in excess of 10%. These retail properties have heavy foot traffic, fast food and other retailers that you physically have to visit; because buying a fresh latte on the internet is not yet available. We understand the retail landscape is changing with Amazon Prime and Google Express. This retail trend also impacts the industrial sector, as distribution centers are moving closer to urban infill locations to keep up with the rising demands for same day delivery. As a result, we are targeting very well located warehouses near city centers similar to the example I mentioned previously.
How did your vintage funds look in the prior cycle? Have you been able to consistently deliver current yield even in declining pricing environments?
Our track record reflects our thesis of diversification. Our approach has served us and our investors well through the downturn and the recovery. We are able to continue to provide risk adjusted returns in this environment by focusing on our strengths and not allowing mission drift to take us to markets like Houston, Las Vegas and Phoenix.
When do you think the asset inflationary cycle slows down? Do you anticipate a softening coming in 2017?
This real estate cycle will slow down when interest rates rise, as cap rates are heavily correlated to treasuries. We won’t see real estate prices fall significantly if the economy continues to improve and grow. All bets are off if treasuries rise and the economy stalls or falls.
How does your team stay current on properties both for acquisition and management? How do you stay top of mind across your many operating relationships?
RMA's management team is comprised of seasoned real estate professionals with extensive experience in real estate investment, development, law, capital markets, portfolio management and fund operations and management.
We have strong, long term, relationships with our local operating partners with the ability to provide on-going capital. We are a rational real estate equity source for our partners, who appreciate what we bring to the table.
Thanks a lot to Dani Evanson for her time with us.
No information made available on the following document is or purports to be investment, tax or other advice or is intended to provide the basis of any credit or other evaluation. Nor should any such information be considered a recommendation by Trusted Insight (TI) or North Capital Private Securities (NCPS), or any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) to purchase or sell any securities. Before entering into any particular transaction, you are advised to obtain such independent financial, legal, accounting and other advice as may be appropriate under the circumstances. In any event, any decision to enter into a transaction will be yours alone, not based on information prepared or provided by this document. TI, NCPS and Regis Metro Associates, Inc. (RMA) hereby disclaim any responsibility to you concerning the characterization or identification of terms, conditions, and legal or accounting or other issues or risks that may arise in connection with any particular transaction or business strategy. Neither TI, NCPS and RMA nor any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) accepts any responsibility for or shall have any liability in respect of any use of any information or materials made available on the following document. Nothing shall under any circumstances create any implication that any information made available on the following document is correct or accurate. Neither TI, NCPS nor any of its affiliates or their respective directors, officers, employees or agents (or any related person or entity) makes any representation or warranty with respect to any information made available on the following document.
[1] Capital under management represents the aggregate capital of RMA’s clients and investment vehicles committed to real estate investments as of 12/31/14. RMA has approximately $775 million in regulatory assets under management as of 12/31/14.